1. Economic Reforms ( )

2. People’s Republic of China
, PRC, Beijing
Chairman: Mao Zedong
5-Star Red Flag
Republic of China government retreated to Taiwan

3. Mao’s Legacies Industrial development in 1950s
Modeled after the Soviet Union
Produced enlarged proletariat
Workers overwhelmingly concentrated in cities
Promotion of rural industrialization
Employees in rural factories not strictly ``workers”

4. Industrialization in 1950s

5. Mao Zedong Died in 1976 Turning point in China’s postwar era
The 3rd Plenum of the 11th CCP Central Committee in 1978
Deng Xiaoping’s ascendancy
economic modernization became focus
US-PRC established diplomatic relationship in 1979

6. Incentives for High Growth
International strategic vision at the top
links China’s security and global influence to its economy
growth must proceed at least at the overall speed of that of the East Asian neighbors

7. Maoist Growth Unsustainable
Central control over resource allocation
Prevented flow of information & factors of production
Prevented market-determined prices and competition
Prevented China from utilizing cheap labor in the international economy

8. Strategic Vision Short-term growth Long-term growth
Utilization of relatively cheap labor force
Long-term growth
Technological change and dynamism

9. Structural Imperative
Decentralization of economic decision making
incentive of local officials
Demographic pressure and employment problems
net population growth (108 from )
massive migration into cities
aging population

11. Transition Strategy From central planning to indicative planning
From indicative planning to market allocation of goods and services
``Grow out of the plan” instead of ``shock therapy”
Transition and growth at the same time

12. Economic Reform Measures
Sequence
agricultural production (late 1970s - )
international trade and investment ( )
state-owned enterprises (early 1980s - )
“socialist market economy” ( )
fiscal reforms ( )
privatization and private sector ( )
accession into the WTO (2001)

13. Outcomes of Reforms in 1980s
Reforms began smoothly
Economic growth accelerated
Nobody was made obviously worse
Opponents were bought off
Complex interdependence between state-owned enterprises and non-state sector
Government revenues eroded

14. Fiscal Reforms
Replacement of appropriating profits with taxing profits
1983 – 1984
Fiscal contracting with the provinces
mid-1980s
Division of the tax-collection system
two-tier tax collection system
1994

15. Banking System Reforms
The People’s Bank of China
nominally the central bank
part of the central bureaucratic hierarchy
at the rank of province/ministry
“policy” banks and commercial banks
reduction of provincial leaders’ influence over bank decisions
loans to state-owned enterprises

16. Foreign Trade & Investment
Encourage investment, export, and import
preferential treatment for overseas capital
Gradual opening of the domestic market
Accession to the WTO (December 2001)

20. From 1999 to 2011 Private enterprises [siying]
increased from 1.5 million to 9.7 million
investors increased from 3.2 million to 20 million
employees increased from 20 million to 104 million
Since 1992 siying GDP grows at 60% a year and tax grows at 80% a year

22. Decline of Workers’ Status
Explosive growth of new (or revived) types of factories in which workers are compensated and treated quite poorly
Erosion of the privileged treatment of workers in state firms
Rising complaints, petitions, slow-downs, strikes, sabotage, physical violence, etc.
Labor Law was passed in 1994

23. Challenges Ahead Separation of party-state and the economy
pervasive corruption
World Trade Organization
internationally competitive corporations
social welfare programs
support of senior and unemployed citizens
widening gap between rich and poor
regional divide